Big buildings, big business

The industry’s poor reputation is set to change as it embraces technology to reduce onsite problems, cost and time

By CIO UK

June 25, 2007

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The UK construction industry is set to capitalise on the 2012 London Olympics in a big way. It is already one of the UK’s most important economic sectors, with 250,000 firms employing more than two million people and representing, according to the DTI, eight per cent of gross domestic product (GDP).

The Labour government’s commitment to national infrastructure renewal in the form of the Private Finance Initiative – of which there was nearly £40 billion in projects up until the start of last year, a lot going to new schools and hospitals – means that the pressure to deliver quality solutions is high. But the industry as a whole has been slow to embrace IT. According to one CIO operating in this industry it is five to 10 years behind mainstream commerce, partly because of the demographics of the industry and partly because of the mobile nature of the work it does. This is reflected in the type of average salaries in IT in this area, which last year were equivalent to posts in the education area, and well behind the remuneration of IT professionals in financial services and computer services – £50,000 versus £30,000. But construction firms, particularly the larger ones, are beginning to take information technology more seriously and are realising significant benefits as a result.

Fighting its poor reputation

In the past the construction industry has had a poor reputation generally. One industry estimate last year put 73 per cent of construction projects running over budget and 50 per cent of errors coming down to poor information. Partly due to the fragmented nature of the industry, where teams of contractors pull together for short periods, it’s been historically difficult to tie together disparate business functions. But consolidation in the field – particularly at the higher end – as well as increased IT mobility and a realisation that computers, seen as just for offices, can have a real contribution to make onsite, is changing the situation.

Lure of the Olympics

As the industry edges nearer to the 2012 Olympics prize and the large infrastructure projects in London continue, a growing number of executives, including IT professionals, are entering companies in the construction sector from other industries. These IT directors or CIOs tend to be more familiar with tier one ERP providers such as SAP and Oracle and thus are less likely to patronise the niche players that have tended to dominate the sector, such as Coins and others. A factor here too was Oracle’s acquisition of Peoplesoft and JD Edwards, which has given it further ‘critical mass’ in the sector, and doubled the number of Oracle construction clients in the UK Construction 100 list. Significant Oracle sites now include Balfour Beatty and Costain, for instance.

While ERP is gaining more acceptance as a central co-ordinating platform in the field, other business processes are also changing, with greater use of off-site fabrication in a bid to reduce onsite problems, cost and time. This is seen by observers as leading to greater interest in supply chain management systems, collaboration tools, especially to support the design process, more deployment of 3D and co-ordination techniques in CAD and, interestingly, more adoption of mobile applications for the collection of data onsite. One such example is McNicholas, which has given mobile devices with a customised worktime management application to 800 of its staff.

The regeneration of key sites in preparation for the 2012 Olympics could lead to an extra 150,000 jobs in construction and should see the use of IT for improved efficiency become the norm among the big players. This boom in the construction area is already underway. At the time of writing, three of the industry’s biggest players – Balfour Beatty, Carillion and Costain – all issued near-identical trading statements which said that performance in 2007 has been good. In its statement, Carillion said it expects cost savings from its acquisition of Mowlem to run to £26m a year by the year-end. These savings will be generated from integrating the operating units, business units and people, including the IT team, according to Steve Connor, group IT director, Carillion. Balfour painted a similarly optimistic picture of trading. Activity levels have been particularly strong in its UK building businesses, the construction company said.